As everyone knows right now, there is a cost of living crisis with prices rising by the week.

The situation is likely to get worse too. The latest estimate from the Bank of England forecasts inflation will reach 8% this spring, and will possibly be even higher later this year. They don’t expect it to fall to a more normal 2% until ‘two or three years’ time.’

Here we will look at how the cost of living crisis affects landlords, investors and the letting industry and at what if anything can be done about it.

Probably the most important thing to consider is that the cost of living crisis presents a massive hit to rental affordability .... even where rents don’t rise.

In particular, tenants who took on a tenancy with confidence they could afford the rent easily might not be able to this year. And that doesn’t even consider the tenants who stretched themselves financially when renting a property from the outset.

It’s often said everyone will put a roof over their head as a priority over everything else, but that’s not strictly true in practice. Tenants can’t buy food without money up front. If tenants don’t pay utility bills the utility companies can make them in advance. Most people have to buy fuel or pay train/bus fares or they can’t get to work. So, in reality, paying the rent isn’t a priority over many other things.

So what can landlords and agents do?

Keep in touch with your tenants. This is something which is always a good idea anyway. Make it clear they can (and should) approach you with any issues they’re having as soon as possible.

Point your tenants to any sources of help that might be relevant. For example, advice services to help them claim benefits or help with money management which could make it easier for them to pay the rent.

If a tenant is genuinely struggling to pay their rent ask them to pay as much as they can. Something is better than nothing. Have a formal repayment plan for arrears.

Eviction is always a difficult issue, but especially right now. Good advice might be, if you have to consider eviction, then you have to. There’s not much to be gained at making your own financial situation worse as, ultimately, it won’t help the tenant. But if you can afford not to consider eviction, especially if your tenant has been a good one until now, then carefully consider what alternatives there are.

Remember that the rules around eviction are complex and ever changing, so take expert advice on this if you need to.

Should you put the rent up?

This is a really tough one. It’s really the very worst time to put your rents up. (Though the Government, utility companies and oil companies don’t seem to any qualms about putting taxes and prices up at the worst possible time.) But landlords have rising expenses too so it’s not unreasonable to consider this course of action.

If you’re asking yourself this question consider the pros and cons: Putting the rent up may actually make it less likely you’ll get paid and so receive less money overall, not more. There could be more risk of having to consider eviction. On top of this there will be the costs of finding a new tenant.

In the current climate you might struggle to find a new tenant who can pay the higher rent at all.

Investing in new buy to lets

Rents generally are rising, so some landlords and investors might be tempted to buy new buy to lets right now. But if you are buying a new buy to let (or looking for a new tenant for a property) it’s wise to be extra cautious at the moment. When considering applications apply some simple stress testing at the application and referencing stage. Ask yourself, if the cost of living goes up even more (and it’s likely to) will the tenant still be able to afford the rent you’re asking?

As a general guide, a tenant’s income should be at least 2.5 times the rent in order to be affordable. Although in expensive places like London it is frequently less. A good rule of thumb to apply at the moment is that the tenant’s income should be 2.75 or even three times the rent. This will allow more of a safety margin against the rising cost of living over the coming year or two.


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